What Are The Different Categories Of Investment In Real Estate?

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Different Categories Of Investment In Real Estate

Real estate investments can be rewarding only if you have a proper education and support to understand the industry and how real estate investments work. Real estate is one of the oldest businesses and is also the most popular class of asset that draws people due to its potential of providing a quick and good return on investment. Real estate covers a wide variety of properties, from land to buildings, which determines the different types of investment opportunities that exist for each type. For all real estate investors Dallas, it is imperative to know the different kinds of real estate investment options as well as its pros and cons.

Only when you know the types of real estate investments that you can match it with your investment goals and decide what would be right for you. Whether you seek financial independence or look for some passive income, there are several investment options in real estate.

Residential

Apartments, single-family buildings, townhouses, and vacation houses are all residential houses. Although vacation houses are residential buildings, its nature of the use is different because although it is a rental property, there are no long-term tenants. Typically, people rent vacation houses for a short duration, and like any other rental arrangements, there is a rental agreement in place, which in industry parlance is the lease agreement. In the US, residential leases are for 12 months only. You can any use any property for rental purpose.

Commercial

Office buildings and high rises constitute the class of commercial buildings, and you can always invest in constructing or buying a small building and then rent it out to various business owners and companies/organizations to recover the investment and even make a profit.  Unlike the 12-month lease term for residential properties, commercial property leases are long term. Leasing commercial property ensures stable cash flow, and owners remain protected against any interim decline in rental rates. However, if there is a sudden spurt in rental prices, owners are unable to take its advantage as they must honor the lease agreement and wait for rent revision at the time of renewal only.

Industrial

Warehouses used for logistical and supply chain activities are typical examples of using real estate for industrial purposes. Although the lease agreements have almost similar tenures as commercial properties, industrial real estate investments often entail substantial fees.

Retail

Retail properties are commercial properties and consist of shopping malls and other retail storefronts. Depending on the kind of agreement the landlord has with the tenants, they might sometimes receive a share of the revenue of the stores they let out in addition to the base rent.  It acts as an incentive for landlords to maintain the property in the best condition always.

Mixed-Use

Combining any of the above categories into a single project leads to the creation of a mixed-use type of property for diversified commercial use. For example, a mixed-use property comprising of a three-story building can house a bank, a health insurance company, a restaurant, and a few retail stores.

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